Putnam
Europe
Growth
Fund
[GRAPHIC OMITTED: ARTWORK]
SEMIANNUAL REPORT
December 31, 1995
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "The diversity of Putnam Europe Growth Fund's holdings has lent it
considerable safety. The fund was equally competitive when European
markets rallied in 1993 as when they slid in 1994. . . . The fund's
methods are tried and true. It's an excellent choice for investors
looking to gain European exposure."
-- Morningstar Inc., November 10, 1995
* "To a number of pros on both sides of the Atlantic, 1996 looks to be
the year Europe will finally deliver. The Continent's high interest
rates are poised to come down -- perhaps dramatically -- as inflation
remains tame. . . . [T]hrow in a stronger dollar, expected tax cuts in
Germany and Britain, and no tax increase in Spain, and all the
ingredients for a bull market may almost be in place."
-- Business Week, "It Looks Like the Year of the Eurobull,"
December 25, 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
17 Financial statements
[GRAPHIC OMITTED: photo of George Putnam]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
The dramatic rise in the U.S. stock market throughout 1995 tended to
overshadow the generally positive performance of Europe's equity markets
during the period. Thus, it might be easy to overlook the positive
performance of Putnam Europe Growth Fund during the six months ended on
December 31, 1995.
Furthermore, while the U.S. market might be heading toward a pause as
investors digest the sustained advance, European markets may be poised
for further growth as your fund reaches the midpoint of fiscal 1996.
Your fund's managers believe benign inflation will continue on the
Continent as in the United States during the next several months. In
addition, Putnam believes there is a growing likelihood of interest-rate
cuts in Europe, a move that would bolster economic and market prospects.
I am pleased to introduce Mark D. Pollard as the new co-manager of your
fund. Mark has been an analyst in the London office since 1990 and was
recently named head of European equity research. He has eight years of
investment experience.
Respectfully yours,
/s/George Putnam
George Putnam
Chairman of the Trustees
February 21, 1996
Report from the Fund Managers
Justin M. Scott, lead manager
Mark D. Pollard
Although European stock markets moved higher throughout 1995, their
steady rise was virtually eclipsed by the dramatic year-long U.S. equity
rally. Nevertheless, many of the favorable conditions that fueled gains
in U.S. stocks contributed to the solid European performance: stable-to-
declining interest rates, increasing corporate efficiency, and
institutional buying.
Putnam Europe Growth Fund was able to take advantage of the generally
positive investing environment on the Continent. For the six months
ended December 31, 1995, the fund's class A shares provided a total
return of 7.52%; its class B shares, 7.16%; and its class M shares,
7.30%; each at net asset value. Total return at the maximum public
offering price for class A shares was 1.32%; with class M shares rising
3.57% for the period. Class B shares returned 2.16% at the contingent
deferred sales charge.
Your fund's six-month returns at net asset value were only slightly
behind those of the Morgan Stanley Capital International's (MSCI) Europe
Index, which rose 7.76% over the same period. However, over the past
five years -- as the long-term results on page 8 show -- your fund has
outpaced the index. We believe our investment goal of targeting
corporations with strong returns on equity at attractive valuations has
bolstered the fund's returns, and is an effective strategy for investing
in European stocks.
* ECONOMIC SLOWDOWN APPARENT IN CORE EUROPEAN COUNTRIES
Economic slowdown is increasingly pronounced in the major European
countries, a development that is already affecting regional markets.
Accordingly, we are closely monitoring macroeconomic conditions as we
position your fund's holdings in the region. Germany, in particular, is
enduring falling industrial production and a flat gross domestic product
(GDP), with some economists anticipating even sharper downturns in the
months ahead.
France, punctuated by political strife over the past year, is similarly
stagnant, weighed down by prohibitively high interest rates and
distressing levels of unemployment. Economic activity in the United
Kingdom, one of the Continent's strongest market performers in 1995,
also appears to be slackening, although to a lesser degree than
elsewhere. British consumer spending may be conveniently robust ahead of
general elections, and this could prove an important support for
equities in the period ahead.
Despite rapid economic deceleration -- or, perhaps because of it -- we
see a number of positive developments in the core European countries.
Negligible inflation has provided a benign backdrop for stock markets,
as has the possibility of central bank interest-rate cuts. Just as
important, however, is the gradual emergence of a European equity
culture. Indeed, we are finding that more and more companies across the
Continent are seeking to increase shareholder value by deploying their
corporate assets more productively, cutting inefficiencies, and
improving annual return on equity. These are all vital qualities in the
race to attract capital in today's globalized, highly competitive
financial markets.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS
(12/31/95)*
showing:
UNITED KINGDOM 18.9%
FRANCE 14.1%
NETHERLANDS 12.1%
SPAIN 9.6%
SWITZERLAND 9.3%
SWEDEN 8.3%
GERMANY 7.9%
IRELAND 5.2%
AUSTRIA 4.1%
DENMARK 3.1%
Footnote reads:
*Based on percentage of net assets. Holdings will vary over time.]
We believe a number of holdings in your fund's portfolio have embodied
this positive attitude toward shareholders -- largely among Dutch and
Swiss corporations (together, these two nations account for nearly 21.4%
of the fund). The Dutch airline KLM, Switzerland's Ciba-Geigy chemical
and pharmaceutical conglomerate, Union Bank of Switzerland, and Swiss
Reinsurance are all striving to improve their returns on equity and
bolster their competitiveness. French and German companies have also
begun to move toward this model. We believe similar objectives may help
other European companies to weather otherwise weak regional business
conditions.
* PERIPHERAL EUROPEAN COUNTRIES MAY OFFER ATTRACTIVE OPPORTUNITIES
Over the fund's semiannual period, we saw excellent performance in the
Spanish and Irish equity markets. Furthermore, we are optimistic that
these stock markets may continue to be strong in the months ahead.
Ireland today boasts one of Europe's fastest-growing economies -- we
anticipate GDP growth of some 5.5% in 1996 -- helped by the ongoing
benefits of European Union regional development funds, as well as
excellent economic fundamentals. CRH, an Irish building supply company
may continue to gain from this encouraging environment in the months
ahead. Spain's economy, like Ireland's, may grow faster this year than
many other European economies; accordingly, we currently have a fairly
high Spanish allocation of 9.6 % of the fund's portfolio. We are
optimistic about prospects for our Spanish holdings, particularly for
Iberdrola, an electric utility; Banco de Bilbao Vizcaya, a financial
services firm; and Tabacalera, a state-owned tobacco firm which should
benefit from cost-reductions as Spanish elections may bring a
conservative government to power.
Top 10 Holdings (12/31/95)*
SGL Carbon (Germany)
Carbon products
BAT Industries (U.K.)
Diversified conglomerate
Pharmacia & Upjohn, Inc. (Sweden)
Pharmaceuticals and biotechnology
Veba (Germany)
Diversified holding company
Argyll Group PLC (U.K.)
Food retailer
Austria Mikro Systeme (Austria)
Specialized semiconductor manufacturer
CRH PLC (Ireland)
Construction products manufacturer
Unilever (Netherlands)
Food products manufacturer
KLM (Netherlands)
National air carrier
Autoliv (Sweden)
Auto parts and original equipment
These holdings represent 22.2% of the fund's net assets. Portfolio
holdings will vary over time.
* OUTLOOK FOR EUROPEAN EQUITIES: CAUSE FOR CAUTIOUS OPTIMISM
In the months ahead, we anticipate weakening in Europe's economy. Such
conditions could bring a welcome loosening of interest rates, with a
corresponding increase in Continent-wide liquidity. And slowing growth
could further encourage European companies to trim unnecessary costs,
increase efficiency, and redouble efforts to raise levels of return on
equity -- all of which could support regional stock markets in 1996.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described
holdings were viewed favorably as of 12/31/95, there is no guarantee the
fund will continue to hold these securities in the future.
International investing involves certain risks, including political
developments, economic instability, and currency fluctuations, not
present with domestic investments.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Europe Growth Fund is designed for investors seeking
capital appreciation through investments primarily in common stocks and
other securities of European companies.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 12/31/95
Class A Class B Class M
Inception date (9/7/90) (2/1/94) (12/1/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 7.52% 1.32% 7.16% 2.16% 7.30% 3.57%
- ------------------------------------------------------------------------
1 year 21.24 14.28 20.28 15.28 21.16 16.88
- ------------------------------------------------------------------------
5 years 90.49 79.55 -- -- -- --
Annual average 13.76 12.42 -- -- -- --
- ------------------------------------------------------------------------
Life of class 93.41 82.26 19.56 15.56 22.38 18.08
Annual average 13.20 11.94 9.80 7.86 20.56 16.63
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/95
MSCI EAFE MSCI Europe
Index Index
- ------------------------------------------------------------------------
6 months 8.39% 7.76%
- ------------------------------------------------------------------------
1 year 11.21 21.62
- ------------------------------------------------------------------------
5 years 56.46 73.35
Annual average 9.37 11.63
- ------------------------------------------------------------------------
Life of class A 48.84 65.06
Annual average 7.74 9.85
- ------------------------------------------------------------------------
Life of class B 10.51 18.37
Annual average 5.36 9.21
- ------------------------------------------------------------------------
Life of class M 11.90 22.31
Annual average 10.93 20.41
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and principal value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A
shares and 3.50% for class M shares, which became effective 12/1/94.
CDSC for class B shares assumes the applicable contingent deferred sales
charge, with the maximum being 5%, declining to 1% in the sixth year.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/95
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term $0.365 $0.365 $0.365
- ------------------------------------------------------------------------
Short-term $0.03 $0.03 $0.03
- ------------------------------------------------------------------------
Total $0.395 $0.395 $0.395
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
6/30/95 $13.88 $14.73 $13.75 $13.90 $14.40
- ------------------------------------------------------------------------
12/31/95 14.52 15.41 14.33 14.51 15.04
- ------------------------------------------------------------------------
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
list of equity securities from Europe, Australia and the Far East, with
all values expressed in U.S. dollars.
Morgan Stanley Capital International Europe Index is an unmanaged list
of approximately 627 equity securities originating in one of the 13
European countries, with all values expressed in U.S. dollars.
Performance figures reflect changes in market prices and reinvestment of
distributions net of withholding taxes. The securities in the index may
change over time. Because the fund is a managed portfolio investing in a
wide variety of foreign and domestic securities, the securities it owns
will not match those in the index. The fund is invested primarily (not
less than 85%) in foreign securities.
A Putnam pespective on risk and reward
You've probably been told how important it is to understand the
relationship between an investment's potential rewards and its
accompanying risks. Given the cautionary nature of such instructions, it
may take most investors a while to realize that risk has a positive
side.
Every risk signals a potential reward. Selecting only those investments
that offer the greatest degree of security generally leads to only
modest rewards. Furthermore, even insured or guaranteed investments may
be subject to changes in their rates of return or, in some cases, in
their principal values. Experienced investors know that no investment is
truly risk free and are therefore willing to take on some measure of
risk in order to increase their potential gains.
The greater the risk, the greater the potential reward. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your investment's
return. How much risk? Your financial advisor's feedback and your time
horizon can make all the difference in determining how much risk is
compatible with your investment goals and your peace of mind.
* FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards. It's helpful to understand the types of risks that
can apply to different types of investments, and to look at your own
portfolio with this perspective.
For short-time goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and
reward potential to customize your portfolio.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's
prospectus.
* A RUNDOWN OF RISK TYPES
MARKET RISK Most important for stock funds, but relevant to all funds,
this is a measure of how sensitive a fund's holdings are to changes in
general market conditions. Remember, though, that securities that lose
value quickly in market declines may also show the strongest gains in
more favorable environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this
type of risk is a particular concern for fixed-income inves-
tors. However, interest-rate increases can also have a substantial
negative effect on the stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk
over the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the
security's issuer will not be able to meet its payment, while prepayment
risk involves the premature payoff of a loan, with a resulting loss of
interest income. Professional management and in-depth research are
invaluable in managing both these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share
prices.
<TABLE>
<CAPTION>
Portfolio of investments owned
December 31, 1995 (Unaudited)
Common Stocks (92.9%)*
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Austria (4.1%)
- -------------------------------------------------------------------------------------------------------
22,460 Austria Mikro Systeme International $ 3,634,052
113,000 Mayr-Melnhof Karton AG 144A ADS 1,412,500
13,000 VA Technolgies AG 1,646,710
------------
6,693,262
Belgium (2.3%)
- -------------------------------------------------------------------------------------------------------
2,415 Bekaert S.A. 1,984,337
3,400 Solvay S.A. 1,831,735
------------
3,816,072
Denmark (2.1%)
- -------------------------------------------------------------------------------------------------------
25,000 Danisco A/S 1,203,542
83,400 Tele Danmark A/S ADS 2,303,925
------------
3,507,467
France (12.8%)
- -------------------------------------------------------------------------------------------------------
10,900 Chargeurs S.A. 2,166,446
30,160 Credit Locale de France S.A. 2,410,095
1,704 Financiere et Industrelle Gaz et Eaux 590,521
45,000 Lafarge Coppee (Bearer) 2,894,200
54,000 Michelin Corp. Class B (Registered) 2,149,873
9,000 Peugeot Citroen S.A. 1,185,200
57,000 SGS-Thomson Microelectronics ADR + 2,294,250
6,500 Societe Generale Paris 801,651
20,000 Societe Nationale Elf Aquitane ADR 735,000
34,000 Societe Nationale Elf Aquitaine (Bearer) 2,500,703
9,293 Societe Television Francaise 994,562
5,990 Sommer Allibert 1,583,739
4,948 Zodiac S.A. 770,619
------------
21,076,859
Germany (7.2%)
- -------------------------------------------------------------------------------------------------------
800 Munich Re + 1,736,106
7,900 Preussag AG 2,203,450
54,500 SGL Carbon AG + 4,207,762
86,700 Veba AG 3,672,553
------------
11,819,871
Ireland (5.2%)
- -------------------------------------------------------------------------------------------------------
539,096 Allied Irish Banks PLC 2,910,876
471,100 CRH PLC 3,522,085
254,524 Greencore Group PLC 2,183,453
------------
8,616,414
Italy (0.6%)
- -------------------------------------------------------------------------------------------------------
77,000 Danieli & Co. 485,192
200,000 Danieli & Co. (Savings Shares) 541,903
------------
1,027,095
Netherlands (12.1%)
- -------------------------------------------------------------------------------------------------------
40,000 ABN AMRO Holding N.V. 1,819,540
39,065 Aegon N.V. 1,725,958
20,400 Akzo-Nobel N.V. 2,356,092
20,400 Dutch States Mines N.V. 1,675,669
52,776 Getronics Electric N.V. 2,463,099
60,000 IHC Caland N.V. 2,016,179
96,230 KLM-Royal Dutch Airlines 3,377,332
28,000 Royal PTT Nederland ADR 1,015,806
25,000 Unilever N.V. 3,508,090
------------
19,957,765
Portugal (0.4%)
- -------------------------------------------------------------------------------------------------------
42,300 Banco Totta & Accores S.A. (Registered) 698,600
Spain (9.6%)
- -------------------------------------------------------------------------------------------------------
78,500 Banco de Bilbao Vizcaya S.A. (Registered) 2,820,629
356,900 Iberdrola S.A. 3,257,350
55,000 Mapfre Vida Seguros 3,256,043
97,500 Repsol S.A. 3,186,667
85,000 Tabacalera S.A., Ser. A 3,214,931
------------
15,735,620
Sweden (8.3%)
- -------------------------------------------------------------------------------------------------------
44,000 Astra AB 1,755,442
56,500 Autoliv AB 3,300,413
217,000 IRO AB 2,450,242
96,000 Pharmacia & Upjohn, Inc. ADR 3,786,697
150,000 Svenska Cellulosa Ser. B AB 2,326,037
------------
13,618,831
Switzerland (9.3%)
- -------------------------------------------------------------------------------------------------------
2,124 BBC Brown Boveri AG (Bearer) 2,467,412
700 Baer Holdings AG 779,801
1,400 Ciba-Geigy AG (Bearer) 1,225,834
3,750 Ciba-Geigy AG (Registered) 3,299,740
208 Nestle S.A. (Registered) 230,089
1,400 Nestle S.A. (Registered) ADR 77,000
40 Nestle S.A. (Registered) 144A ADR 2,200
6,000 Rieter Holding AG (Registered) 1,732,120
4,750 Surveillance (Registered) 1,626,571
1,413 Swiss Reinsurance Co. (Registered) 1,643,906
2,000 Union Bank of Switzerland (Bearer) 2,167,317
------------
15,251,990
United Kingdom (18.9%)
- -------------------------------------------------------------------------------------------------------
696,034 Argyll Group PLC 3,668,099
443,475 B A T Industries PLC 3,900,917
189,828 Burmah Oil PLC 2,748,140
151,700 East Midlands Electricity 1,568,350
240,000 General Electric Co. (The) PLC 1,320,600
205,000 Guinness PLC 1,506,135
118,200 Molins PLC 1,414,381
289,062 North West Water Group PLC 2,759,964
85,000 Pearson PLC 822,120
454,974 Royal Insurance Holdings PLC 2,693,901
5,900 Scottish Power PLC 33,837
1,350,000 Sears PLC 2,176,200
40,000 Securicor Group PLC Class A 548,700
109,000 Security Services PLC 1,500,276
70,072 Siebe PLC 862,376
100,692 Tate & Lyle PLC 736,663
224,300 Vodafone Group PLC 801,368
645,262 Weir Group (The) PLC 2,130,332
------------
31,192,359
- -------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $127,437,068) $153,012,205
PREFERRED STOCKS (2.0%)*
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------
15,000 Essilor International FRF 12.3 Pfd. (France) $ 2,091,530
8,000 Jungheinrich AG DEM 8.5 Pfd. (Germany) 1,135,146
- -------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $2,967,709) $ 3,226,676
CONVERTIBLE BONDS AND NOTES (0.9%)* (cost $1,866,839)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
DKK 8,000,000 Danisco cv. Bonds 5s, 2004 (Denmark) $ 1,544,845
WARRANTS ( - %)* EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------------------
51,750 Danieli & Co. (Italy) 11/30/99 $ 26,120
6,000 Rieter Holding (Switzerland) 3/13/96 15,085
- -------------------------------------------------------------------------------------------------------
Total Warrants (cost $ - ) $41,205
SHORT-TERM INVESTMENTS (1.9%)* (cost $3,199,572)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
$3,198,000 Interest in $308,242,000 joint repurchase agreement dated
December 31, 1995 with Lehman Brothers Inc. due
January 2, 1996 with respect to various U.S. Treasury
obligations - maturity value of $3,200,096 for an
effective yield of 5.9% $ 3,199,572
- -------------------------------------------------------------------------------------------------------
Total Investments (cost $135,471,188)*** $161,024,503
- -------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $164,732,317.
+ Non-income producting securities.
*** The aggregate identified cost for federal income tax purposes is $135,853,237 resulting in gross
unrealized appreciation and depreciation of $29,168,043 and $3,996,777 respectively, or net unrealized
appreciation of $25,171,266.
ADR or ADS after the name of a foreign holding, stands for American Depository Receipt or American
Depository Shares representing foreign securities on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
</TABLE>
<TABLE>
<CAPTION>
Forward Currency Contracts to Sell Outstanding
at December 31, 1995 (aggregate face value $40,701,662)
Market Aggregate Delivery Unrealized
Value Face Value Date Depreciation
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $14,092,538 $13,994,464 6/27/96 $(98,074)
Deutschemarks 3,943,627 3,938,125 6/27/96 (5,502)
Dutch Guilders 11,862,806 11,819,946 6/27/96 (42,860)
French Francs 11,031,365 10,949,127 6/27/96 (82,238)
- -------------------------------------------------------------------------------
$(228,674)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31,1995 (Unaudited)
Assets
- ------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $135,471,188) (Note 1) $161,024,503
- ------------------------------------------------------------------------------------------------
Cash 823
- ------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 223,331
- ------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,424,673
- ------------------------------------------------------------------------------------------------
Receivable for securities sold 4,179,204
- ------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 18,765
- ------------------------------------------------------------------------------------------------
Foreign Tax Reclaim 326,145
- ------------------------------------------------------------------------------------------------
Total assets 168,197,444
Liabilities
- ------------------------------------------------------------------------------------------------
Payable for securities purchased 1,667,410
- ------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 240,700
- ------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 278,318
- ------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 344
- ------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 379
- ------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 115,701
- ------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 65,720
- ------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 842,268
- ------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 228,674
- ------------------------------------------------------------------------------------------------
Other accrued expenses 25,613
- ------------------------------------------------------------------------------------------------
Total liabilities 3,465,127
- ------------------------------------------------------------------------------------------------
Net assets $164,732,317
Represented by
- ------------------------------------------------------------------------------------------------
Paid-in Capital (Notes 1 and 4) $136,094,539
- ------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (3,045,598)
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions (Note 1) 6,346,022
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 25,337,354
- ------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $164,732,317
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($100,955,905 divided by 6,953,050 shares) $14.52
- ------------------------------------------------------------------------------------------------
Offering price per Class A share (100/94.25 of $14.52) * $15.41
- ------------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($62,054,302 divided by 4,331,786 shares) ** $14.33
- ------------------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($1,722,110 divided by 118,672 shares) $14.51
- ------------------------------------------------------------------------------------------------
Offering price per Class M share (100/96.50 of $14.51) * $15.04
- ------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
**Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended December 31,1995 (Unaudited)
Investment Income
- -------------------------------------------------------------------------------------------
<S> <C>
Interest $238,602
- -------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $28,735) 999,600
- -------------------------------------------------------------------------------------------
Total investment income 1,238,202
Expenses:
- -------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 636,488
- -------------------------------------------------------------------------------------------
Investor Servicing and custodian fees (Note 2) 129,033
- -------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,930
- -------------------------------------------------------------------------------------------
Reports to shareholders 18,763
- -------------------------------------------------------------------------------------------
Auditing 11,835
- -------------------------------------------------------------------------------------------
Legal 2,408
- -------------------------------------------------------------------------------------------
Postage 14,888
- -------------------------------------------------------------------------------------------
Registration Fees 3,530
- -------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 126,925
- -------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 279,542
- -------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 5,018
- -------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,700
- -------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,118
- -------------------------------------------------------------------------------------------
Other 2,572
- -------------------------------------------------------------------------------------------
Total expenses 1,240,750
- -------------------------------------------------------------------------------------------
Expense reduction (Note 2) (29,424)
- -------------------------------------------------------------------------------------------
Net expenses 1,211,326
- -------------------------------------------------------------------------------------------
Net investment income 26,876
- -------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 6,856,537
- -------------------------------------------------------------------------------------------
Net realized gain on forward currency contracts and
foreign currency translation (Note 1) 1,140,680
- -------------------------------------------------------------------------------------------
Net unrealized depreciation on forward currency contracts and
foreign currency translation during the period (85,696)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the period 2,916,582
- -------------------------------------------------------------------------------------------
Net gain on investments 10,828,103
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,854,979
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
December 31 June 30
1995* 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $26,876 $1,451,000
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 7,997,217 (611,507)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 2,830,886 20,171,610
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 10,854,979 21,011,103
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (2,658,374) (1,071,976)
- --------------------------------------------------------------------------------------------------------
Class B (1,668,837) (505,129)
- --------------------------------------------------------------------------------------------------------
Class M (45,021) (599)
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 21,350,593 28,627,017
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 27,833,340 48,060,416
- --------------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------
Beginning of period 136,898,977 88,838,561
- --------------------------------------------------------------------------------------------------------
End of period (accumulated net investment loss
of $3,045,598 and $3,072,474, respectively) $164,732,317 $136,898,977
- --------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------
For the Period
December 1, 1994
Six months (commencement
ended of operations)
December 31* to June 30
- ------------------------------------------------------------------
<S> <C> <C>
1995+ 1995
- ------------------------------------------------------------------
Class M
- ------------------------------------------------------------------
Net asset value,
beginning of period $13.90 $12.35
- ------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------
Net investment income (.03) .09
- ------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.04 1.62
- ------------------------------------------------------------------
Total from investment operations 1.01 1.71
- ------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------
From net investment income -- --
- ------------------------------------------------------------------
In excess of net investment income -- --
- ------------------------------------------------------------------
From net realized gain
on investments (.40) (.16)
- ------------------------------------------------------------------
Total distributions (.40) (.16)
- ------------------------------------------------------------------
Net asset value, end of period $14.51 $13.90
- ------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 7.30 (c) 14.06 (c)
- ------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,722 $746
- ------------------------------------------------------------------
Ratio of expenses
to average net assets (%)(d) 0.89 (c) 1.08 (c)
- ------------------------------------------------------------------
Ratio of net investment
income to
average net assets (%) (0.18) (c) 1.61 (c)
- ------------------------------------------------------------------
Portfolio turnover (%) 18.69 (c) 44.33
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
For the Period
February 1, 1994
Six months (commencement
ended Year ended of operations)
December 31* June 30 to June 30
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995+ 1995 1994
- ------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------
Net asset value,
beginning of period $13.75 $11.62 $12.49
- ------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------
Net investment income (.03) .08 .04
- ------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.01 2.21 (.91)
- ------------------------------------------------------------------------------------
Total from investment operations .98 2.29 (.87)
- ------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------
From net investment income -- -- --
- ------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ------------------------------------------------------------------------------------
From net realized gain
on investments (.40) (.16) --
- ------------------------------------------------------------------------------------
Total distributions (.40) (.16) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $14.33 $13.75 $11.62
- ------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 7.16 (c) 19.92 (6.97) (c)
- ------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $62,054 $45,733 $21,368
- ------------------------------------------------------------------------------------
Ratio of expenses
to average net assets (%)(d) 1.02 (c) 2.13 .95 (c)
- ------------------------------------------------------------------------------------
Ratio of net investment
income to
average net assets (%) (.24) (c) .74 .54 (c)
- ------------------------------------------------------------------------------------
Portfolio turnover (%) 18.69 (c) 44.33 36.73
- ------------------------------------------------------------------------------------
<CAPTION>
For the Period
September 7, 1990
Six months (commencement
ended of operations)
December 31* Year ended June 30 to June 30
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995+ 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $13.88 $11.64 $9.84 $10.10 $8.74 $8.50
- -----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .02 .18 .18 .18 .15 (a) .19 (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.02 2.22 1.73 (.14) 1.49 .14
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.04 2.40 1.91 .04 1.64 .33
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income -- -- (.11) (.15) (.22) (.09)
- -----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- (.11) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.40) (.16) -- (.04) (.06) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.16) (.11) (.30) (.28) (.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.52 $13.88 $11.64 $9.84 $10.10 $8.74
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 7.52 (c) 20.84 19.45 0.70 19.10 3.91 (c)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $100,956 $90,420 $67,471 $17,552 $9,618 $3,369
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses
to average net assets (%)(d) .65 (c) 1.38 1.50 1.81 2.14 (a) 1.81 (a)(c)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to
average net assets (%) .16 (c) 1.45 1.17 1.38 1.63 (a) 2.28 (a)(c)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.69 (c) 44.33 36.73 58.56 54.45 30.83 (c)
- -----------------------------------------------------------------------------------------------------------------------------------
* Unaudited
+ Per share net investment income has been determined on the basis of the weighted average number of
shares outstanding during the period.
(a) Reflects an expense limitation in effect during the period. As a result of such limitation, net
investment income for the year ended June 30, 1992, and the period ended June 30, 1991 reflect expense
reductions of approximately $0.04 and $0.15, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Not annualized.
(d) The ratio of expenses to average net assets for the period ended December 31, 1995 includes amounts
paid through expense offset arrangements. Prior period ratios exclude these amounts (see note 2).
</TABLE>
Notes to financial statements
December 31, 1995 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks capital appreciation by investing primarily in common stocks
and other securities of European companies.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price on the principal market in which the
securities are traded, or, if no sales are reported -- as in the case of
some securities traded over-the-counter -- the last reported sale price.
Short-term investments having remaining maturities of 60 days or less
are stated at amortized cost, which approximates market value. All other
investments are stated at fair value following procedures approved by
the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies managed by Putnam Investment Management,
Inc., (Putnam Management), the fund's manager, a wholly owned subsidiary
of Putnam Investments, Inc., and certain other accounts. These balances
may be invested in one or more repurchase agreements and/or short-term
money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to 102% of the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to
the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is "marked to market" daily and
the change in market value is recorded as an unrealized gain or loss.
When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. The maximum
potential loss from forward currency contracts is the aggregate face
value in U.S. dollars at the time the contract was opened. The fund
could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter into a
closing position.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid annually. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
I) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $34,512. These expenses were being amortized
on a straight-line basis over a five-year period and were fully
amortized at December 31, 1995.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund for the quarter. Such fee is an annual rate of 0.80% of the
first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million, and 0.60% of any amount over
$1.5 billion. The fee is subject to reduction in any year to the extent
that expenses (exclusive of distribution fees, brokerage, interest,
taxes and extraordinary expenses) of the fund exceed 2.5% of the first
$30 million of average net assets, 2% of the next $70 million and 1.5%
of any amount over $100 million and by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of Putnam
Management on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $930 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
During the period ended December 31, 1995, the fund adopted a Trustee
Fee Deferral Plan (the "Plan") which allows the Trustees to defer the
receipt of all or a portion of Trustees Fees payable on or after July 1,
1995. The deferred fees remain in the fund and are invested in the fund
or in other Putnam funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly owned subsidiary of Putnam
Investments, Inc.Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the period ended December 31, 1995, fund expenses were reduced by
$29,424 under expense offset arrangements. Investor servicing and
custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested the assets utilized in connection
with the expense offset arrangements in an income producing asset if it
had not entered into such arrangements.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares
respectively.
For the period ended December 31, 1995, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $63,781 and $2,035
from the sale of class A and class M shares, respectively and received
$45,232 in contingent deferred sales charges from redemptions of class B
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the period ended December 31, 1995,
Putnam Mutual Funds Corp., acting as underwriter received $995 on class
A redemptions.
Note 3
Purchases and sales of securities
During the period ended December 31, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$42,832,903 and $27,812,055 respectively. There were no purchases or
sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on
the identified cost basis.
Note 4
Capital shares
At December 31, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
December 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 5,631,842 $ 81,758,982
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 172,246 2,444,211
- ----------------------------------------------------
5,804,088 84,203,193
Shares
repurchased (5,367,433) (78,158,600)
- ----------------------------------------------------
Net increase 436,655 $ 6,044,593
- ----------------------------------------------------
Year ended June 30, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 6,207,675 $ 79,375,730
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 81,382 984,724
- ----------------------------------------------------
6,289,057 80,360,454
Shares
repurchased (5,570,659) (71,266,570)
- ----------------------------------------------------
Net increase 718,398 $ 9,093,884
- ----------------------------------------------------
Six months ended
December 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 2,784,695 $ 40,019,159
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 106,354 1,488,906
- ----------------------------------------------------
2,891,049 41,508,065
Shares
repurchased (1,885,242) (27,149,210)
- ----------------------------------------------------
Net increase 1,005,807 $ 14,358,855
- ----------------------------------------------------
Year ended June 30, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 3,864,840 $ 48,800,205
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 36,738 442,334
- ----------------------------------------------------
3,901,578 49,242,539
Shares
repurchased (2,414,407) (30,401,989)
- ----------------------------------------------------
Net increase 1,487,171 $ 18,840,550
- ----------------------------------------------------
Six months ended
December 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 116,014 $1,690,545
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,160 44,811
- ----------------------------------------------------
119,174 1,735,356
Shares
repurchased (54,175) (788,211)
- ----------------------------------------------------
Net increase 64,999 $ 947,145
- ----------------------------------------------------
For the period
December 1, 1994
(commencement of
operations ) to
June 30, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 91,188 $1,177,622
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 47 571
- ----------------------------------------------------
91,235 1,178,193
Shares
repurchased (37,562) (485,610)
- ----------------------------------------------------
Net increase 53,673 $ 692,583
- ----------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Anthony W. Regan
Vice President
Justin M. Scott
Vice President and Fund Co-Manager
Mark D. Pollard
Vice President and Fund Co-Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Europe
Growth Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For
more information, or to request a prospectus, call toll free: 1-800-225-
1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
[LOGO: PUTNAM INVESTMENTS]
The Putnam Funds
One Post Office Square
Boston Massachusetts, 02109
Bulk Rate
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PAID
Putnam
Investments
22804-057/234/688 1/96
